New chief gets tough with rule breakers

RIGA - The currently applicable penalties are not harsh enough to prevent violations of competition regulations in the marketplace; therefore, the Competition Council will step up the penalties for such violations, said Latvia Competition Council’s new chief, Skaidrite Abrama, in an interview with  the Nozare.lv business portal.

Abrama, who took office on June 26, says she will concentrate on cases currently investigated by the Competition Council, and look into the council’s past work. The Competition Council will analyze reasons for unwanted or possible deformations of the market in order to prevent them from repeating. Communication with companies and society will also be highly important in the Competition Council’s further work.

“The Competition Council will definitely be harsh with competition violations, and the penalties will be stepped up - it is important that a violation carries adequate punishment. The penal system in Latvia has not been stringent enough to prevent violations of competition regulations. At the same time, we will do much preventive work educating and informing companies, in order to prevent the development of an environment where such violations are possible,” said Abrama.
According to the Competition Council’s data, investigation into 60 cases was completed in 2011, and the total amount of penalties that the Competition Council imposed for violations of competition regulations was 6.3 million lats (9 million euros) last year.

The risk of cartels and companies abusing their dominant position on the market still exists in Latvia, said Abrama. At the moment, the Competition Council is investigating 17 cases of suspected cartels and nine cases of companies abusing their dominant position on the market.

“The number of these cases proves that the trends have not changed and are unlikely to change in the future. The Competition Council is working on various methodologies for ascertaining the risk of cartels and abuse of dominant position, because market participants unfortunately are rather passive in informing the council about factors that violate competition on the market,” said Abrama.

Furthermore, it is now much harder to ascertain a violation of competition regulations than before. “Five years ago, the Competition Council had to simply take a look at a contract to establish a violation, but now such things can no longer be found in contracts,” explains Abrama. That is why the Competition Council now more often carries out inspections at companies, which is the only way to find evidence, much of which comes from electronic documents, including correspondence by e-mail.

Cutting out the waste
Abrama has already mentioned that merging the Competition Council with the Public Utilities Commission would be justified, and such a merger might be considered sometime in the future after all the pros and cons are evaluated. In the fall of 2009, Saeima voted against merging the Public Utilities Commission with the Competition Council, which was supported by then Competition Council head Ieva Jaunzeme.
Abrama notes that many of the two institutions’ functions overlap. “One of the tasks for the Public Utilities Commission is to foster competition on the market,” says Abrama, explaining that if two authorities are doing the same job, they might just as well merge.

Competition watchdogs and regulators are in the merger process in several European countries at the moment. Such a merger was carried out in Estonia a few years ago, creating an authority that is very effective now, says Abrama.
Economy Minister Daniels Pavluts’ press secretary Daiga Grube previously told Nozare.lv that the Economy Ministry was not planning to merge the Competition Council with the Public Utilities Commission. The Competition Council and the Public Utilities Commission have different functions and tasks, and their functions only overlap regarding market analysis (in a limited number of sectors), said Grube.

Beefing up the enforcers
The Competition Council plans to hire an officer who will actively study the economic aspects of cases investigated by the council, introduce new economic approaches and use econometric methods, since the council experiences a growing necessity for analyzing various economic phenomena, for example, excessively high or low prices, says Abrama.

The Competition Council currently employs 34 people and plans to increase its staff to 45 this year. The employees have to keep up with a very heavy workload, working on complicated and voluminous cases. This year, the council hired four new employees, who are already successfully working, said Abrama.
The economy plays an important role in busting cartels; therefore, the council must continue improving its economic analysis capacity. The council has good lawyers, which is proved by the fact that nearly all Competition Council decisions are confirmed in courts.

At the moment, half of the council’s employees are lawyers, the other half economists or technical experts.
The government approved Competition Council employee Abrama as the council’s new chairwoman on June 12. The chairperson of the Competition Council is appointed for a five-year period by the government on the Economy Minister’s recommendation.

Abrama has a master’s degree in management from the University of Latvia. She has also studied at the Swiss universities Akad and Imaka and the Business Promotion Institute at the Austrian Chamber of Commerce.
Abrama has been working at the Competition Council from 2004 to 2009 as a council member, and as a senior economist from 2009 to 2011. Before that, she worked as deputy director at the Internationaler Bund Institute of Languages.